Class 12 Micro Economics - Chapter Market Equilibrium NCERT Solutions | Suppose the demand and supply curves of
Suppose the demand and supply curves of salt are given by:
(a) Find the equilibrium price and quantity.
(b) Now, suppose that the price of an input that used to produce salt has increased so, that the new supply curve is qs = 400 + 3p
How does the equilibrium price and quantity change? Does the change conform to your expectation?
(a) Suppose the government has imposed at ax of Rs 3 per unit of sale on salt. How does it affect the equilibrium rice quantity?
qD = 1000 – p- (1)
qs = 700 + 2 p –(2)
(a) At equilibrium
qd = qs
1000 - p = 700 + 2p
300 = 3 p
P = Rs100
qd = 1000 - 100 [Substituting the value of p in equation (1)]
= 900 units
So, the equilibrium price is Rs 100 and equilibrium quantity is 900 units.
(b) New quantity supplied '
qs = 400 + 2p
At equilibrium qd = qs
1000 - p = 400 + 2p
600 = 3p
200 = p
p = Rs 200
Prior to the increase in the price of input, the equilibrium price was Rs
100, and after the rise in input's price, the equilibrium price is Rs 200.
So the change in the equilibrium price in Rs 100 (200 - 100).
qd = 4000 - 200 [Subtitling the value of p in equation (1)]
= 800 units
The change in the equilibrium quantity is 100 units (i.e. 900 - 800 units).
Yes, this change is obvious, as due to the change in the input's price,
the cost of producing salt has increased that will shift the marginal cost
curve leftward and move the supply curve to the left. A leftward shift in
the supply curve results in a rise in the equilibrium price and a fall in the
equilibrium quantity.
(c) The imposition of tax of Rs 3 per unit of salt sold will raise the cost of
producing salt. This will shift the supply curve leftwards and the
quantity supplied equation will become
ys = 700 + 2 (p - 3)
At equilibrium
Yd=Ys
1000 - p = 700 +2 (p - 3)
1000 - p = 700 +2p – 6
306 =
p = Rs 102
Substituting the value of p in equation (1)
yd = 1000 – p
yd = 1000 – 102
yd = 898 units
Thus, the imposition of tax of Rs 3 per unit of salt sold will result in an
increase in the price of salt from Rs 100 to Rs 102. The equilibrium
quantity falls from 900 units to 898 units.
More Questions From Class 12 Micro Economics - Chapter Market Equilibrium
- Q:-
How will a change in the price of coffee affect the equilibrium price of tea? Explain the effect on equilibrium quantity also through a diagram.
- Q:-
Suppose the price at which the equilibrium is attained in exercise 5 is above the minimum average cost of the firms constituting the market. Now if we allow for free entry and exit of firms, how will the market price adjust to it?
- Q:-
When do we say that there is an excess demand for a commodity in the market?
- Q:-
Suppose the market determined rent for apartments is too high for common people to afford. If the government comes forward to help those seeking apartments on rent by imposing control on rent, what impact will it have on the market for apartments?
- Q:-
Explain through a diagram the effect of a rightward shift of both the demand and supply curves on equilibrium price and quantity.
- Q:-
When do we say that there is an excess supply for a commodity in the market?
- Q:-
How are equilibrium price and quantity affected when income of the consumers
a) Increase
b) Decrease
- Q:-
Explain market equilibrium.
- Q:-
In what respect do the supply and demand curves in the labor market differ from those in the goods market?
- Q:-
Explain how price is determined in a perfectly competitive market with a fixed number of firms.
Popular Questions of Class 12 Micro Economics
- Q:-
Explain the concept of a production function
- Q:-
What would be the shape of the demand curve so that the total revenue curve is?
(a) A positively sloped straight line passing through the origin?
(b) A horizontal line?
- Q:-
Discuss the central problems of an economy.
- Q:-
What are the characteristics of a perfectly competitive market?
- Q:-
What do you mean by the budget set of a consumer?
- Q:-
What is the total product of input?
- Q:-
From the schedule provided below calculate the total revenue, demand curve and the price elasticity of demand:
Quantity
1
2
3
4
5
6
7
8
9
Marginal
Revenue
10
6
2
2
2
0
0
0
-
- Q:-
What do you mean by the production possibilities of an economy?
- Q:-
How are the total revenue of a firm, market price, and the quantity sold by the firm related to each other?
- Q:-
What is budget line?
Recently Viewed Questions of Class 12 Micro Economics
- Q:-
Why is the short-run marginal cost curve 'U'-shaped?
- Q:-
What is the average product of an input?
- Q:-
What is the marginal product of an input?
- Q:-
What do you mean by a normal good?
- Q:-
Explain price elasticity of demand.
- Q:-
What is budget line?
- Q:-
Explain why the budget line is downward sloping.
- Q:-
The following table shows the total cost schedule of a firm. What is the total fixed cost schedule of this firm? Calculate the TVC, AFC, AVC, SAC and SMC schedules of the firm.
- Q:-
A firm earns a revenue of Rs 50 when the market price of a good is Rs 10. The market price increases to Rs 15 and the firm now earns a revenue of Rs 150. What is the price elasticity of the firm’s supply curve?
- Q:-
Let the production function of a firm be Q=2 L2 K2Q=2 L2 K2
Find out the maximum possible output that the firm can produce with 5 units of LL and 2 units of KK. What is the maximum possible output that the firm can produce with zero units of LL and 10 units of KK?
- All Chapters Of Class 12 Micro Economics
- All Subjects Of Class 12